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    ICICI Securities cuts rating on RBL Bank shares to 'sell'; slashes target price

    ICICI Securities cuts rating on RBL Bank shares to 'sell'; slashes target price

    ICICI Securities cuts rating on RBL Bank shares to 'sell'; slashes target price
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    By Dipti Sharma   IST (Published)

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    ICICI Securities has downgraded its rating on shares of RBL Bank to 'sell' from 'hold' given the looming uncertainty after RBI’s appointment of Additional Director on RBL Bank’s Board and the Board accepting Vishwavir Ahuja’s leave for six months. RBI’s similar action at other banks in the past has hinted at compliance or asset quality or governance or business risk issues.

    ICICI Securities has downgraded its rating on shares of RBL Bank to 'sell' from 'hold' given the looming uncertainty after RBI’s appointment of Additional Director on RBL Bank’s Board and the Board accepting Vishwavir Ahuja’s leave for six months.
    RBI has appointed Yogesh K Dayal who is the Chief General Manager, RBI, as an Additional Director on RBL Bank Board for two years. At the same time, RBL Bank Board has accepted the request of Vishwavir Ahuja to proceed on leave.
    Vishwavir Ahuja’s existing term as RBL Bank’s MD & CEO was ending on June 30, 2022, which is still six months away. Hence, the development comes as a complete surprise is expected to weigh on the stock until clarity emerges.
    Reacting to the developments, the RBL Bank stock price nosedived about 23 percent on the BSE on Monday.
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    Besides, by having an Additional Director on the Board, ICICI Securities believes that the central bank wants to be more supervisory and track the progress closely on succession planning as well as business performance.
    There were expectations of clarity on succession and smooth transition and bank would have utilised the last six months of extension of MD & CEO tenure to provide more clarity on succession, the brokerage firm.
    Limited progress on clear succession planning could be one of the reasons triggering the move, said the brokerage firm.
    "RBI’s similar action at other banks in the past has hinted at compliance or asset quality or governance or business risk issues," the domestic brokerage firm said in a note.
    Given the circumstances under which RBI initiates such an action of appointing an Additional Director on the Board in the past, there will be clarity required not only on management succession but fundamental performance and strategy of the bank as well because there could be something more than the mere succession issue, ICICI Securities said.
    RBI has previously appointed additional directors on the Boards of YES Bank, J&K Bank, Dhanlakshmi, Ujjivan Small Finance Bank and Lakshmi Vikas Bank, the brokerage firm warned.
    With this, the brokerage firm has also slashed its target price on the banking stock to Rs 130 from Rs 181.
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